Sleep Number (SNBR) Q2 2024 earnings summary

Executive summary

• Transformation initiatives and restructuring actions are driving improved financial resilience, with cost reductions and margin expansion ahead of expectations for the first half of 2024.

• Net sales for Q2 2024 were $408 million, down 11% year-over-year, reflecting a historic recession in the mattress industry and constrained consumer spending.

• Adjusted EBITDA for Q2 2024 was $28 million, down from $35 million last year, but slightly ahead of expectations due to cost reductions.

• Operating expenses were reduced by $19 million year-over-year for the quarter, excluding restructuring costs, and $44 million year-to-date.

• Free cash flow for the first half was $9 million, a $21 million improvement from the prior year.

Financial highlights

• Gross margin rate for Q2 was 59.1%, up 150 basis points year-over-year, with gross profit at $241 million.

• Q2 net loss was $5.1 million, or $(0.22) per share, compared to net income of $0.8 million last year.

• Sales and marketing expenses fell 8% to $182 million, but as a percentage of sales increased to 44.7%.

• Research and development expenses decreased to $12 million, reflecting lower headcount and reprioritization.

• Interest expense rose to $12 million, driven by higher average interest rates.

Outlook and guidance

• Full-year 2024 Adjusted EBITDA guidance reiterated at $125 million–$145 million.

• Net sales expected to be down mid-single digits for the year, with back half demand and sales flat to down low single digits.

• Gross margin rate expected to expand at least 100 basis points in 2024, approaching 60% in the back half.

• Free cash flow guidance for the year is $50 million–$70 million, with $40 million–$60 million expected in the second half.

• Management expects an additional $1–2 million in restructuring costs through the remainder of 2024.